The Hindu Business Line : ‘HR must sustain the human capital advantage’

A comprehensive new HR strategy that spans the value chain and is well-aligned to business imperatives arising out of these difficult times has to be envisioned.

D. Murali

N S Rajan

With the global economic slowdown showing signs of moving into a recession, the times are no doubt tough, observes N. S. Rajan, Partner and National Director, Human Capital Services, Ernst & Young. A liquidity crunch, falling consumer demand and erosion of investments have put organisations under tremendous pressure to control their expenses and the HR (human resource) function too, therefore, has to quickly adjust its focus in order to support the business needs, he adds, during a recent e-mail interaction with The New Manager.

“The newspapers are peppered with news of layoffs, as if implying that this is the first response of the HR function. While cutting down on budgets, especially expenses in HR, manpower cost seems to be the low-hanging fruit,” Rajan notes. However, the challenge, he says, is to maintain a long-term perspective while deciding the action plan. “Intellectual capital is not added overnight and the efforts must be recognised as an investment, not just as expenditure. The need of the hour for HR is to convert this situation into an opportunity that can help the organisation emerge stronger once the troubled times are over.”

Rajan, an alumnus of XLRI, is on CII’s national committees on HR and skills as well as education, apart from being the Regional President-North, National HRD Network, which conferred on him the ‘HR professional of the year 2008’ award.

The role of the HR professional is to be an alchemist, he declares. “Intellect is the new form of property and the HR function needs to play its part in ensuring that the human capital advantage of the organisation is sustained, irrespective of good or difficult times.”

Edited excerpts from the interview:

What are the measures that the HR function can undertake to manage the difficult times ahead?

Increased demands from the management to show the value of investments, competition for scarce resources and greater emphasis on ‘doing more with less’ require HR to respond proactively and show a positive impact on business objectives. In order to do this, the HR function needs to examine the implications of current changes and evaluate the way forward for people strategies.

A comprehensive new HR strategy that spans the value chain and is well-aligned to business imperatives arising out of these difficult times has to be envisioned. Some of the key directions that would be essential could include the need to:

Restructure the organisation in order to adapt to the new business environment.

Focus on agility, responsiveness, speed of decision-making in organisation design.

Strengthen the linkage of performance and reward.

Sharpen the linkage between individual performance and variable pay.

Explore a fungible workforce to enable quick re-deployment.

Communication strategy to keep all employees and stakeholders updated about business objectives and new expectations.

Examine alternatives such as redeployment/planned sabbaticals/job sharing and rightsizing only as a last resort.

Maintaining employee morale and improving productivity. A creative and innovative approach towards problems is necessary to convert threats into opportunities.

How different is the Indian HR scene from that in the developed economies?

The HR function in developed economies tends to be mature and often the focus is to increase the depth of HR interventions. These economies have also given rise to multinational and global corporations. The endeavour in these organisations is to operate as if the world is one and the focus is on making the human capital pool truly global, with a free flow of resources to where the markets demand. At the same time, the quest is to work towards policies and systems that are truly aligned irrespective of the geography an employee operates in.

On the other hand, in the emerging countries the HR scene in some ways is a reflection of the maturity level of the country. As opposed to the developed countries where HR is already relatively quite mature, in the developing economies the focus is on establishing and covering the entire gamut of activities that HR can support the business with. While western multinationals and academia have significantly influenced HR processes and systems, there is a fair amount of catching up to do. In this context, the Indian HR scene reflects fairly mixed levels of maturity of the function. One needs to view different segments of the economy to draw parallels.

In my own observation over the years, MNCs in the country follow strategic directions set at the headquarters and have a fairly advanced level of HR systems and processes. What has been a hallmark is the ability of home-grown corporations, be it Indian conglomerates or leading public sector entities, to design and implement state-of-the-art HR policies and systems at the highest level. The HR function has been recognised as a strategic partner beyond doubt and the leaders often find a place in the boardroom, and especially in the case of PSUs the HR directors have represented the function in the boardroom for decades. On the other hand, the mid-sized and smaller enterprises are still evolving from a nascent stage.

What is unique about the Indian HR professional?

Education is the fountain of knowledge and fortunately for India, the need to impart human resources as a specialised form of knowledge has benefited the function. Institutions like XLRI, TISS and so on have trained students over several decades and the HR field in India is a mature one. The quality and the depth of work you see across Indian organisations is indeed revealing.

The spirit of service that seems to pervade those aspiring for HR also has been the bedrock of how organisations have embraced the function. Over the years the function has successfully passed many stages of evolution starting from basic industrial relations to being seen as a strategic partner today.

Another interesting aspect of the HR community is its affinity for the fraternity. Organisations like the National HRD Network have done yeoman service in disseminating knowledge over the decades. In fact, Dave Ulrich rated National HRD Network as the finest in the world for mastering the art of ‘learning through listening’ through special events where experiential learning from senior practitioners shape the next generations on best practices, learning and failures too. This is reflective of the HR function that constantly seeks to enrich and enable.

Any changes to our laws that can make HR smoother?

The problems in our country, as far as the labour laws are concerned, are manifold. First, the sheer number of laws that regulate the labour market; these are both archaic and humungous. Close to 45 laws at the national level and four times that figure at the state level currently exist making it too complex a situation for anyone’s good.

Secondly, the laws are too archaic and have lost their relevance with the current market realities. A lack of flexibility in hiring and firing results in loss of organisational competitiveness in a globalised economy where demand is volatile and competition stiff. Most of the laws apply only to the formal sector, which constitutes only a tiny fragment of the total workforce. In fact, the complexity of laws has contributed towards non-formal employment.

While it is not required that industry be allowed to hire and fire at will, the need nevertheless is to create laws that provide greater flexibility for the same. At the same time, steps should be taken to simplify the laws so that the incredibly slow dispute resolution process can be hastened. It should be understood that simpler laws, while safeguarding the interests of the workforce, will induce employers to go for formal employment and thereby increase the overall level of employment and go a long way to making India an even better place for business.

On HR for SMEs

The SMEs (small and medium enterprises) face challenges on the HR front due to, among others, limited staff and budgetary support for HR; limited top leadership focus on HR activities; and limited structural and intellectual capacity within the organisation.

In light of the above, the need is to create a basic minimum HR infrastructure with suitable policies and processes that can be scaled up as the organisation grows. As the SMEs lack the capacity to do it themselves, industry bodies and Government need to support the creation of some generic models that can be adopted by SMEs easily and without great expense.

Industry collaboratives/Government need to take steps to increase the realisation within SMEs of the criticality of the HR function and the fact that intellect is the new form of property that needs to be nurtured for sustained growth and successes. An important step that the CII, through the National Committee on HR, has taken in this direction is to create an ‘HR in a Box’ which allows these small enterprises to quickly upscale the state of human resources.

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